Auto Insurance Deductibles: What You Need to Know

If you’re considering purchasing auto insurance, it’s important to understand how deductibles work. Auto insurance deductibles are the amounts you pay out-of-pocket before your insurance kicks in and helps cover the costs of damages or injuries resulting from an accident. 

Knowing what a deductible is and how it works can help you make an informed decision when selecting the right auto insurance for your needs. 

Learn more about auto insurance deductibles and why they matter.

What is an auto insurance deductible?

Simply put, a car insurance deductible is an out-of-pocket amount you pay when filing a claim. By agreeing to pay a set dollar amount or percentage of your total expense following an approved insurance claim, you are protected against covered losses. 

This arrangement allows you to customize your policy to meet budgetary and safety needs. Depending on your provider, you may have the privilege of making changes during the policy term, after a significant life event, or when it’s time for renewal. 

Choosing a higher deductible typically results in lower premium payments, saving you money over time.

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How does an auto insurance deductible work?

Car insurance deductibles work by limiting how much you are responsible for paying when filing a claim. After an accident, the insurer will assess the damage, subtract your deductible from the total cost of repairs, and then pay out the remaining amount.

For example,  if your deductible is $500, and the repairs after an accident are $3,000, the insurer will subtract the deductible amount from the total cost and cover the remaining $2,500.

All types of auto insurance coverage that use deductibles work the same way. So, regardless of whether you’re making a claim for auto collision, comprehensive coverage, or uninsured motorist protection — you’ll pay the agreed-upon deductible before your insurer pays the remainder of your approved claim.

When do you have to pay a deductible?

Your deductible is typically applied to collision and comprehensive auto insurance claims as long as the policy covers the damage. You do not have to write out a separate check or make any additional payments to your insurer when you pay a deductible, as the provider will deduct the amount of the deductible from the approved claim payout. 

For example, suppose your claim is accepted and approved for $7,000, and your deductible is $450. In that case, your insurance company will pay you $6,550 — the difference between the total claim amount ($7,000 in our example) and the deductible amount ($450).

It’s important to note that if damages are less than or equal to your deductible amount costs, then no money changes hands. 

In other words, if damage ends up costing only $200 (in this scenario), you won’t receive any reimbursement from your insurance company because it would be lower than what would need to be paid out to cover the cost of your deductible.

What is the average insurance deductible cost?

Auto insurance deductibles typically range from around $250 to $1,000, with the average auto insurance deductible being about $500. Deductible amounts can vary depending on where you live and other factors unique to your situation, including the kind of car you drive.

It’s worth noting that auto insurance deductibles are not the same for all types of coverage — you may pay a higher deductible for collision coverage than comprehensive coverage, for example.

How Deductibles Affect Auto Insurance Rates

For a safe driver with a healthy driving record, opting for a higher deductible could save you money in the long run. 

It may seem like the more logical financial decision to opt for the higher deductible in return for lower monthly insurance rates. However, this strategy is only beneficial if you can afford the larger sum if an unexpected event occurs.

Before you agree to a higher auto insurance deductible, research other ways to lower your auto insurance premiums and decide if the money you save on rates is worth the risk of paying more out-of-pocket after a claim.

How to Choose an Auto Insurance Deductible

As mentioned earlier, the average cost of an auto insurance deductible is around $500, but most insurance companies allow you to choose any amount you want. 

When choosing an auto insurance deductible, consider how much you would be comfortable paying out-of-pocket if you were to get into an auto accident. Can you easily cover the cost of a higher deductible? If your auto insurance deductible is $1,000, can you pay that much out-of-pocket if necessary?

 Consider the following before you set your deductible:

• Your vehicle’s value
• Your auto loan or lease
• Possibility of filing a claim
• The out-of-pocket expenses you can afford
• The type of coverage you have

Different types of auto insurance will have different deductibles. For example, deductibles for personal injury protection (PIP) insurance are often lower than comprehensive insurance deductibles.

Be sure to speak with your auto insurance agent so they can help determine the best auto insurance deductible amount for your particular needs.

High vs. Low Auto Insurance Deductibles

A high deductible auto insurance policy may be the right option for you if:

• You are less likely to be involved in an auto accident or file a claim
• You have an emergency fund to cover any large repair costs that may arise
• Your car is comparatively expensive
• You feel comfortable taking on some additional risk

Meanwhile, a low deductible auto insurance policy is more suitable for you if:

• You prefer to minimize risk
• You are more likely to file a car insurance claim
• You do not have the savings to cover a large unexpected bill
• Your vehicle is of lower value

When choosing auto insurance deductibles, consider your insurance needs and financial situation.

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Does fault in an accident matter when paying a deductible?

If you have liability coverage and there is no damage done to your vehicle, you don’t have to pay a deductible. But when there is damage, and you decide to file a claim, you may have to pay the collision deductible. It all depends on who was at fault and what insurance policies are involved. 

If the other driver is entirely at fault, their provider may take responsibility for the repairs, including your applicable deductible. 

However, in cases where fault is shared between parties, you may need to cover some or all of the related repair costs.

Other Situations Where Auto Insurance Deductibles Don’t Apply

Here are some situations where auto insurance deductibles don’t apply:

You Selected a Disappearing Deductible

Some insurance companies offer “disappearing deductibles” — providers will reduce deductibles by $100 for each year of accident and claim-free driving, usually up to $500. So if your deductible is $500, you may no longer have to pay a deductible for comprehensive or collision claims after five years or more. 

However, it’s important to remember that if you file an insurance claim with this type of auto insurance discount, your deductible may reset back to the original amount.

Another Person Files a Claim Against Your Liability Coverage

There is typically no deductible associated with your liability insurance coverage. So if another party files a claim against you for injuries or damage caused by your driving, you will not have to pay anything out of pocket.

However, your provider will only pay up to the limits of your policy. You’ll be responsible for any costs that exceed your liability policy limits.

What To Do If You Can’t Afford Your Auto Insurance Deductible

If you are facing financial hardship and can’t afford your auto insurance deductible, some options may be available, including:

• Negotiate a deal with your mechanic. It’s worth inquiring with your mechanic to see if they are willing to waive your deductible or let you make payments in the long term. This kind of agreement does not violate any laws and could give you some much-needed financial assistance.
• Take a loan. Getting a loan can also help you cover your auto insurance deductible, especially if you have an expensive repair. Consider the loan’s interest rate and repayment schedule.
• Put the charge on a credit card. Some auto insurance companies will allow you to put the deductible charge on a credit card, provided it is within your credit limit. 
• Save up until you can afford it. You may have between 30 days to 10 years to file auto insurance claims, depending on the policies of your auto insurance provider. This could give you time to save and pay the deductible when it is due.

Choosing the lowest deductible amount, usually $250, may come with higher rates, but it will also save you from paying for expensive repairs out-of-pocket.

Auto Insurance Deductibles: The Bottom Line

Your insurance deductible is what you pay out of pocket before your insurance company starts footing the bill. The average cost of a car insurance deductible is $500, but it can range anywhere from $250 to $1,000 or more.

How much you pay for your monthly auto insurance largely depends on how high (or low) you set your deductible. If you have a history of accidents or traffic violations, you may be required to carry a higher deductible to offset the risk associated with insuring you.  

It’s good to understand auto insurance deductibles and how they work before buying a policy. Knowing what you are responsible for can help you make smarter, more informed auto insurance decisions and save you money in the long run.

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